CAIRO: Egypt s Raya Technology and Communication aims to diversify into logistics to tap demand in a relatively virgin market as it shifts away from its main technology businesses, the firm s chairman said.
Raya, which sells mobile handsets, runs call centers and provides outsourced IT services, intends to use its experience in technology to drive its expansion beyond these core activities.
Our target is that in five years time we will get 50 percent of our profit from non-classical, non-core activities, from new activities, Khalil told Reuters in an interview on Wednesday.
Khalil said Raya will consider any project offering at least a 20 percent return on individual investments of no more than 100 million Egyptian pounds ($18 million) that fill a niche and utilize the firm s strengths in technology.
Raya will next month establish a heavy trucking company using tracking systems and automation in a joint venture with private equity firm Citadel Capital, Khalil said.
Trucking and ground transportation in Egypt is mostly run by small firms unable to guarantee delivery specifications.
Raya and Citadel will each hold 45 percent of the new operation, with the remaining 10 percent held by its chief executive, Tamer Badrawi, who is also a Raya executive.
Khalil said the project, moved forward by five months due to solid demand, will start with 30 trucks tracked by global positioning systems and should grow quickly.
You re talking eventually a fleet of a few hundred, he said. It should be quite sizable by mid-next year.
The firm will also start building a plastic recycling center in July that is expected to be operational one year later at a cost of LE 40 million, and is reassessing Sudan, which it shied away from a couple of years ago.
There is huge potential in Sudan but also major constraints, Khalil said, noting the country s high tariffs and poor infrastructure.
We are not looking to be a private equity fund, (but) we are trying to use our cash in the best possible investment opportunities, Khalil said.
The firm, which got 15 percent of its profit from outside Egypt in 2009, aims to increase that contribution. This year I think it will be more than 20 percent, Khalil said.
Already present in Algeria and Nigeria, Khalil said both countries are very promising markets.
The business environment in Algeria, which is tussling over tax with Egyptian mobile network operator Orascom Telecom, does not concern him.
We have had a very good business environment until today, Khalil said, adding that the outlook looks good.
Raya has recently opened a fourth core operation – the building, managing and leasing of corporate property with integrated systems for security, communication, and energy and waste management.
Raya has spent LE 100 million to purchase land in three blocks around Cairo and will spend another LE 500 million over the next three years, including LE 350 million this year, to build offices, Khalil said.
Raya is due to issue its full-year results by the end of March. Khalil said Raya had not reached its own initial expectations but had produced good results compared to peers and considering the effect of the global slowdown.
At least we have not lost market share in core sectors, he said. We gained a few percentage points in each.
The firm s third-quarter net profit was LE 13 million, up 18 percent from a year earlier.